A pre-approval is valuable to both buyers and sellers. It’s hard to find a buyer who will make an offer without a pre-approval letter from a lender, and it’s hard to find a lender who will approve a loan without proof that the buyer is qualified to handle their monthly payments.
The biggest reason for getting pre-approved for a mortgage before you start house-hunting is that it shows that you’re a serious homebuyer.
A potential seller will know that you are able to afford the house and can meet their current asking price. You’ll eliminate the risk of losing the opportunity to buy the home because of financing problems. With that in mind, what do you need to prepare to get pre-approved for a mortgage?
Requirements to Complete for Pre-Approval
1. Proof of Income
The lender will want to know that you can afford your mortgage payments. To prove that, you’ll need to provide your last year’s W-2 forms and pay stubs. You’ll also need to show your latest bank statement. If your employer pays a portion of your monthly housing costs, you’ll need to submit a letter from your employer stating the amount of that contribution.
2. Proof of Assets
You’ll need to provide your accountant with a complete list of all of your assets. This includes your retirement accounts, stocks and bonds, IRAs, and any assets that are titled in your name. Your assets will be used as collateral to secure your mortgage.
3. Good Credit
Your credit score will always be an important part of a lender’s approval decision. With that in mind, you need to aim for a FICO score of 620 or higher to boost your chances of getting approved for a conventional loan, though even reaching a score of 580 can be beneficial since it allows you to pay as little as 3.5 percent down payment according to FHA guidelines.
4. Employment Verification
You’ll need to provide a letter from your employer stating your position, how long you’ve been employed, your current salary, and your job description. If you are self-employed, the lender will ask more from you, such as your income, location and nature of the business, its financial strength, and even the market’s demand for your product or services.
All this is to ensure you have a stable job, and that you can maintain your employment throughout the duration of your mortgage plan.
5. Other Documentation (Driver’s License, Social Security number, and More)
These documents will be requested for identity verification, which will help the lender verify that you are currently employed and your income range.
What is the Difference Between Pre-Approval and Pre-Qualification?
Pre-approval is a step above pre-qualification. A pre-approval letter is based on a more in-depth analysis of your financial history and income. A pre-qualification letter is based on a lender’s “qualifying” guidelines for an amount that could be approved.
There is no guarantee that the lender will approve a specific loan; the pre-qualification letter is only an estimation of the loan amount that you could be approved for.
The Bottom Line: Increase Your Chances of Purchasing Your Dream Home with a Pre-Approved Mortgage
Every homebuyer strives to unlock the doors of their dream home with as few complications as possible, and getting a pre-approved mortgage can increase your chances of doing that, so don’t wait until you’re ready to make an offer on a home to find out if you’re eligible for a loan. Instead, start the process of getting a pre-approval before you start house-hunting.
How Can We Help You?
If you’re looking for Sacramento mortgage lenders, you’ve come to the right place. Mortgages and loans can be tricky for many homeowners, but with the help of Hawkins Home Loans, getting a loan would be a breeze.
Whatever you need — whether you want to buy a home, refinance, or need cash from your home equity — we are your online source for stress-free loan processing. With our incredibly low rates and amazing service, we’ll help you reach your financial goals faster. Learn more about our services today!